Forbes Online: The Consigliere of Family Wealth

An interview with Tim Lappen titled "The Consigliere of Family Wealth," discussing his practice and career, was published in Forbes online edition.

The Consigliere of Family Wealth

Tim Lappen is a high-tech auto enthusiast is in the fast lane helping billionaires and ultra high-net worth individuals and families plan effectively and manage succession. From shirtsleeves to shirtsleeves in a generation is what Tim works to ensure never happens, from the simple issues to the most surreal and complex, he instead pushes from shirtsleeves to custom-tailored state-of-the-art fabric of wealth preservation and creation.

How did you get started in the family office business? I started with a test in high school that predicted I’d be a good camp counselor or therapist—I must be the type who likes to help people! My dad was an attorney, as was his father; each of them had a practice similar to mine, where they helped people they liked, with whatever they needed. After graduating from UCLA law school in ‘75 I started out as a litigator, but soon realized that my real love was not the law per se—I didn’t have the desire to be the world ex- pert on one area of the law. I wanted to be the person that could help people with whatever they needed, and a family office group allowed me to do that. In its basic definition, a family of- fice is hired to help an individual or a family with their legal and business needs on a more holistic level, with anything from labor questions, to trust and estate questions, to corporate or litigation concerns.

What are some of the more unusual of situations you’ve dealt with? A couple of the more interesting things I worked on: one was a family that wanted to have a child and neither the husband nor the wife was able to biologically participate, so we had to draw up an agreement between the husband, the wife, a sperm donor, an egg donor, and a womb donor. That brought up some interesting legal questions! I’ve also been involved in negotiating a crypt agreement for a family that wanted to have something very special at the cemetery for the patriarch. Beyond the normal legal concerns, we looked at land use and zoning to be sure the cemetery had the right to the land as long as the family anticipated wanting to have the crypt—which was basically forever.

How much of your work relates to legal issues between different generations of a family? I’ve done a lot of estate planning and part of that involves prenuptial agreements and even post-nuptial agreements. All marriages end—either by divorce or when a person passes away. A pre- or post-nuptial agreement works very well in the context of an estate plan, and sometimes very famous people will have a collection they want to keep intact: instruments, motor vehicles, art—and we’ll develop a creative solution for what their desire is for that collection.

Often, prenuptial agreements are for the second and third generation, not the initial one that was created; sometimes the person referred to us is in his or her 20s or early 30s, and doesn’t know how much he or she is worth because it’s never been fully disclosed by the parents or grandparents. We typically advise the client to have that family discussion, because we really don’t think it’s right for the lawyer to be telling someone, “By the way, you’re worth $300 million.” Sometimes they’re concerned that it might impact the pending marriage but generally it’s not a huge surprise. With that kind of wealth, the family has lived in such a way that everyone knows the family has money. Spring breaks in Switzerland, flying on their private jet—that’s a pretty good clue. But if they’re young, sometimes they’re surprised by the magnitude of it.

Who is your typical client?I don’t have a breakdown, but I can tell you that our clients cover the complete spectrum of wealth. Those clients that have the least net worth are probably approaching $1 million, and the top three-dozen or more clients with the greatest net worth possess north of $1 billion. But again, it’s not just about wealth—it’s how complicated is your life, and how much of it do you want to have other people handle? The typical family office looks a lot like a personal assistant who works full-time for the family. The most complicated family office I worked for had more than 100 people, and they had another 40 or so people as staff on houses and aircraft. That was a family worth about $7 billion. Many families of that wealth have several entities and trusts. They do have unique needs for both diversification and for estate planning.

You love cars. Has that played a role in your business, and has that resulted in some good client relationships?Not only do I love cars, but I love to help people buy or sell cars—not for money, but to help somebody find a Bugatti, for example. It’s like any network you might be wired into—art, gems, wine—you might know somebody who’s looking for something. I share my “car guy e- mail” with about 500 people who have a passion for motor vehicles. It also provides fun opportunities for me to drive some of the most exotic cars in the world such as the Bugatti Veyron, which now sells for a little over $2 million. The Bugatti people lent it to me as a thank you for helping a client buy one. The Grand Sport model stands as the fastest production vehicle made today, clocked at 268 miles an hour. Zero to sixty in 2.5 seconds! I’ve driven motorcycles and cars that are fast before, but this goes so fast that it takes the brain a little bit of time to figure out what the body is actually experiencing, because it seems to defy physics.

What are the most common challenges or frustrations among the types of clients you work with? One unifying concern for people of wealth is how to provide for their children without being incentivizing or dis-incentivizing. None of us want to spoil our kids. They’re concerned about how much to leave to the kids, and how much to give them during life. One of the valuable aspects of our firm is that we’ve represented so many people of extreme wealth, and we can provide examples of what other people have done (obviously without discussing names) and give them choices to consider. If all I did for my client was what they ask me to do, it wouldn’t be a great relationship for them or for me, because it would be limited by their perception of what their options are.

When it comes to family wealth planning, what should people pay attention to that they’re not, and what are some things that people are overly concerned with that they shouldn’t worry too much about? That’s a very individual question, but in general I see a natural inclination to look at experts in particularly narrow silos. But someone needs to be looking at the whole picture in the financial and legal worlds. I compare this to the role of a general physician. Despite the variety of medical specialists now available, people have retained their internist or family physician to help them with the general issues that will come up in their lives. That general physician has the big picture, but might refer out to specialists as needed. Even though we’ve lived in our own bodies for our lifetime, we still trust the doctor to ask what’s going on that is new, or has changed.

Similarly, from a legal standpoint, it’s important to be knowledgeable across the spectrum of legal needs, and see the interrelationship of those issues. For example, there was a high-profile person who had a nanny, and that nanny later wrote a book that was very embarrassing to the family. This family had never thought to prepare a confidentiality agreement, which costs a few hundred dollars to prepare. In a family office, clients can have that kind of conversation with their lawyer that would lead to the lawyer suggesting a confidentiality agreement.

So having a few general conversations might make a client realize that he or she needs legal help? That is true; in the same way that just because you’ve never had a car accident doesn’t mean you don’t need car insurance. I have yet to meet a new client that didn’t have either a liability or a missed opportunity that could be corrected with just a little bit of foresight—a situation where an ounce of prevention is worth a pound of cure, where I can help you beforehand but I can’t do anything after the fact. The game of life is filled with rules that you have to follow, whether you are aware of them or not. In addition to knowing what the rules are, people need to know what the consequences might be if they break those rules. A fine of a hundred dollars is a different concept than a month in jail, or a criminal case.

What do you think has really differentiated your practice from other firms? Our niche is to provide a combination of high- touch and high-responsiveness, along with a very broad understanding of the law. I like to say that of the maybe 75 silos of legal work that are a mile deep, I need to know at least the top 10 feet of all of them. I need to know what to look for, much like a physician who recognizes a problem that may need input from a specialist, and then adds that input into the entire picture of the client. That physician analogy is really very similar to my practice. I’m a single point of contact that can refer out to many specialists, lawyers and non-lawyers, in my office or throughout the country or world, depending on what’s needed.

Any final words of wisdom?I think about my business philosophy much like the launching of a space shuttle. If you make the right one or two inch correction in the angle before leaving the earth, you’ll get where you’re going. But if you don’t make that correction, you’ll find yourself with a 10,000-mile left turn to make when you get close to the destination. Making small course corrections through life, as facts and circumstances change, those are easy to do. The little moves you do right will end up making a huge difference in the long run.

Timothy Lappen is a partner at Jeffer Mangels Butler & Mitchell LLP, a law firm based in Los Angeles. Tim is the founder and chairman of the firm’s Family Office Group, as well as a member of the firm’s Corporate, Real Estate, Hospitality, Entertainment and Banking & Finance Groups. Lappen’s practice, spanning more than 35 years, emphasizes representing family offices as well as projects involving general corporate and real estate law, including business and real estate syndications and investments. Tim represents clients with a wide range of projects, such as virtually every need of high-net worth individuals, their families and their businesses. His work involves myriad family office matters, general business, real estate, hospitality, intellectual property, tax, litigation, land use and more. He represents entertainers and athletes with regard to a variety of projects, including estate planning, pre- and post-nuptial agreements, philanthropic and general business advice.